By Xavier Fontdegloria
Sentiment among American consumers declined in May to the lowest level in more than a decade, erasing April's gains, as fears about inflation persisted.
The final reading of the index of consumer sentiment released Friday by the University of Michigan stood at 58.4, down from the preliminary estimate of 59.1 and below the 65.2 level registered in April.
Economists polled by The Wall Street Journal expected the index to remain unchanged from the preliminary reading.
Consumer confidence stands at its lowest level since August 2011. However, souring Americans' moods have not caused for now a pullback in consumer spending, a major driver for U.S. economic growth.
Consumer spending rose by 0.9% in April, posting a fourth straight month of gains, according to data from the Commerce Department released Friday. A strong labor market, increasing wages and savings are seen holding up households' consumption despite high inflation, economists say.
"This recent drop was largely driven by continued negative views on current buying conditions for houses and durables, as well as consumers' future outlook for the economy, primarily due to concerns over inflation," said Joanne Hsu, the survey's director.
In May, consumers expect prices to rise by 5.3% for the year ahead, down from the 5.4% advance recorded in April. This is the first time that inflation expectations for the next 12 months have eased since December 2021.
For the next five years, Americans expect inflation to stand at 3%, unchanged from the previous month, the data showed.
The index measuring Americans' assessment of the current economic conditions fell to 63.3 from 69.4 in April, declining slightly compared with the preliminary early-month reading of 63.6.
The index of consumer expectations, which reflects the balance of respondents anticipating improved business conditions in the next six months, fell to 55.2 from 62.5 the previous month. The preliminary estimate was 56.3.
Consumers expressed less pessimism over future prospects for their personal finances than over future business conditions, with less than one quarter of consumers expecting to be worse off financially a year from now, Mr. Hsu said.
"A stable outlook for personal finances may currently support consumer spending," she said. "Still, persistently negative views of the economy may come to dominate personal factors in influencing consumer behavior in the future."
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(END) Dow Jones Newswires
May 27, 2022 10:32 ET (14:32 GMT)Copyright (c) 2022 Dow Jones & Company, Inc.